Leadership: Leaders, Followers, Environments

When in Rome, New Delhi, or Beijing: Corruption and global business

Globalism has created powerful incentives for many companies to do business abroad, where enforcement of anticorruption laws might be comparatively capricious and slack. Some argue that individuals and organizations doing business in countries where corruption is prevalent should not be expected to adhere to strict American or Western standards of ethical practice. But the logic for such opinions is flawed for two reasons. First, ethics, unlike eating habits or family customs, has a universal human basis. Bribery and corruption are already prohibited in most nations; they simply look the other way due to failures in the enforcement machinery. Second, many organizations have actually benefited by taking the high road, by doing the right thing even if it cost them in the short term. Nonetheless, individuals and companies operating in areas of rampant corruption are required to make difficult choices.

The United States and many other nations have plenty of laws prohibiting corruption. The Foreign Corrupt Practices Act of 1977, for instance, is a U.S. law enforced by the U.S. Department of Justice and the Securities and Exchange Commission. It prohibits corrupt payments to foreign officials for obtaining or keeping business. This law requires that books and records be kept in “reasonable detail,” accurately reflecting all foreign transactions and “dispositions of assets.” It has significant penalties associated with ...